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The DBT programme, if it manages to overcome
the challenges, might well confound its critics and create a whole new paradigm
for delivering of entitlements in India

The Direct
Benefits Transfers (DBT) programme was announced with much fanfare
as a “game changer”. Even before it could be rolled out in 43 districts, the FM
rolled back the programme to 23 districts for the pilots, within a fortnight of
the announcement of the programme. Since then much air-time has been devoted to
the merits and demerits of this programme with the debate largely along ideological
lines.

What
needs to be clearly acknowledged that despite these initial setbacks, the idea of
the DBT programme that has been announced is not just unexceptionable, it is a
move in the right direction that was long overdue. Cash transfers are not a new
idea, not even in India, and most of the programmes that have been brought
within the ambit of this programme are existing cash transfers. The programme
that has been announced is not creating any new cash transfers but is instead consolidating
the delivery of the existing schemes.

The
real “game changer” in this is two-fold: the idea of universal financial inclusion and, the timely transfer of benefits to entitlement holders without intermediaries and unnecessary
paperwork. The use of Aadhar
enabled authentication as the backbone of this system is likely to plug
leakages that are built into these programmes. The technological/ IT
architecture as well as the proposed financial architecture, have the potential
of transformational change in rural areas, not very dissimilar to the revolution
that rural telephony and mobile telephony have unleashed over the past two
decades. Critics of the DBT, in failing to recognize this transformational
potential, are doing themselves a disservice.

As Supreme
Court Commissioners, we have repeatedly highlighted to the Court and the
Government, through our reports, the abject failure of the both the State and
Central Governments in reaching pension benefits in time to some of the most
marginalized sections of our society. With the exception of a few states like Andhra
Pradesh and Odisha, pensions, reach often six months late and in some
instances, after even longer durations. Over the years, we have also documented
many cases of duplication and fraud in pension benefits. If these pensions are channelized
through the proposed new DBT architecture, it will not only ensure timely
delivery at the doorstep of the pensioner through micro-ATMs, it will
also cut down on fraud because of the last mile authentication by Aadhar of
the entitlement holder. The same holds true for all the other schemes that are
being brought under the ambit of the DBT.

The
sticky point here though is the transfer of existing “in-kind” subsidies
through the DBT route, especially with food subsidies that are channelised
through the Public Distribution System. There are three distinct
possibilities for the food subsidy transfer that the Government could
potentially use. First is the replacement of the food with cash and
dismantling of the PDS. That proposal has never been on the table within Government.
Even without going into the obvious demerits of this proposal, which have been extensively written about, suffice it to say that if Government adopted this
approach, it would have to end the procurement regime which is not in the realm
of consideration of Government.

The
second approach could be to
create an Aadhar enabled PDS which has a last mile authentication,
that is on-line and allows for the stock positions to be updated in real time,
as hasbeen successfully done in the East
Godavari pilot. All other variables in the system would remain the same.
The entitlement holders will buy their food rations from fair price shops as
they do now, with the only difference being that they would submit their
biometric details to the FPS owner through a point of sale device that is connected
either through a GSM network or through other means to an integrated stock
management system. This would not only ensure that the right person gets her
rations, the online system that allows real time updating of the lifting, would
make the entitlement “portable”. In other words, the entitlement holder need
not be tied down to one shop and could potentially buy their rations from
any shop. Since the system would be linked to a nation-wide grid, it would
allow them to buy different quantities of rations in the same month from
different locations in the country. To illustrate this with an example, a family of five members where two members migrate to a different
city for labour, could buy a part of the entitlement that they need in the city
to which they have migrated while the remaining family members who have stayed back
in the village could buy the rest of the allotted quota from the fair price
shop in their area. This would revolutionize the PDS, silence the critics who
believe that the only way to save the PDS is to dismantle it and provide genuine
choices to the entitlement holder. It would also cut down significantly on the corruption in the PDS.

The
third approach
would be to transfer the subsidy of the PDS benefit (similar to the kerosene subsidy transfer in the pilot) directly
into the bank account of the entitlement holder so that she can pay the
full price of the susbsidised commodities to the FPS owner. Since the FPS owner
would also pay the full price for the commodity while lifting the stocks from the
government go down, the possibility of black marketing would be eliminated. All
the other variables would remain the same. There is little to show that the subsidy
transfer would in any way be superior to the second approach and could lead
to diversion of the money meant from food grains to other household
expenditures. I would therefore be more partial to the second approach
which has also been tried out successfully by the Chhattisgarh Government (COREPDS)
using the RSBY smart card instead of the Aadhar enabled system.

From
the Governments perspective, the obvious advantage of the subsidy transfer is
that it would increase the
revenue flow to the Business
Correspondent and make them more viable. As of now, the quantum of the funds flow in the schemes that have been included in the DBT will provide very
little commission for the model to be viable. Adding of more subsidies will
lead to making the system more viable. But the trade off will be significant, given the fungiblity of cash and the potential of it
being put to alternate uses within the household.

In
terms of the challenges that operationalising the DBT are concerned they are three-fold
and daunting. It is just as well that the pilot districts have been reduced to
a more manageable number. If the DBT programme has be a real “game changer” the
correct identification of the poor and expansion of existing entitlement
holders will have to be brought centre-stage. Contrary to the popularly
held notion that Aadhar will solve this problem, the reality is that Aadhar
has little to do with the identification of the poor. It will only
authenticate an individual’s identity. The identification of the poor will be done through the Socio-economic Caste
Census (SECC), an exercise that is mapping India’s poor, undertaken by the
Ministry of Rural Development. For the urban areas, for the first time, uniform
criteria will be devised based on the Hashim Committees recommendations. A lot
will hinge on where the Government draws the cut off for the entitlements for
individual schemes based on the outcomes of the SECC. If the number of
entitlement holders does not increase and the SECC proves to be as flawed as the BPL surveys earlier, there is little hope that this will
be a “game hanger”. On the other hand, if the SECC uses the “exclusion method”, first suggested by former Planning Commission member, Kirit
Parikh, and decides to extend entitlements to all those who are not on the “exclusion list” of the SECC, it
could potentially change the very nature not just of rural development
programmes but also be a decisive blow against the disastrous approach of
trying to target the poor, which has failed miserably and remains the root
cause for the inclusion and exclusion errors that have destroyed the very
purpose of these subsidy regime.

The
issuing of Aadhar numbers with the ambitious deadlines set by the Government is
the second big challenge. While the UIDAI may achieve its target on schedule, that
will clearly not be enough, In States like Tamil Nadu, UP, Bihar, Chhattisgarh,
West Bengal, it is the National Population Register (NPR) that has been tasked
with the collection of biometric data. This is way behind schedule and is
likely to remain so. The only solution is for Government to proactively allow
UIDAI to issue Aadhar numbers across the country and not restrict them to the
states that they are currently issuing them for. Even in the areas where the
UIDAI is issuing the numbers, nothing short of 100 percent coverage is likely
to have an impact since even a 80 percent coverage does not necessarily mean
that 80 percent of the entitlement holders are covered. If Aadhar is not
universalised soon, the only option would be to allow people without Aadhar
numbers to be part of the DBT programme till such time that they receive theirAadhar numbers.

The
last challenge is for Government to ensure that the financial architecture for
the DBT is put in place, in time for the up scaling nationally. This is likely
to prove the hardest nut to crack.

Government
must also be sensitive to the criticism of the UID that has come in from many quarters
regarding the potential security risks that it could pose and the
potential of misuse by intelligence services. While some of the apprehensions
may be misplaced, there is a pressing need for greater legislative control over
intelligence gathering. The debate around the UID is an opportunity to settle this
once and for all. It is after all an issue that UIDAI cannot address and it is
inappropriate to frame this question only in the context of the UID number when
mobile telephony poses far greater risks of unauthorized surveillance.

In
conclusion, the DBT programme, if it manages to overcome the challenges, might well
confound its critics and create a whole new paradigm for delivering of
entitlements in India.

Cash Transfer: Delivery Mechanisms

The
choice of technology plays a vital role in implementing cash transfer programs.
The mode of subsidy delivery could involve direct transfer of cash by the government to the
bank accounts of the beneficiaries. Timely delivery of transfer amounts into
accounts of beneficiaries needs to
be assured so that there are minimal lags and delays in payments. The intended beneficiaries will typically have
severe cash constraints and several competing
demands. Thus, timely delivery becomes a critical point in designing a
successful cash transfer scheme. In the absence of bank accounts, the option of delivering cash transfers
through post offices should also be explored,
at least in the short term. Smart cards with biometric information are being
provided as part of the National Population Register (NPR) and by the UIDAI.
The UIDAI is envisaging a system where the requisite information of beneficiaries (such as thumbprints or iris
scans) can be verified at the time of
purchase and the corresponding transfer amount credited to the bank accounts of each beneficiary. In this case,
the cash transfer would work as a, refund
of the subsidy amount to eligible
beneficiaries of the program, with all
end users paying full market price at the time of purchase.

Biraj Patnaik The author is the Principal Adviser, Commissioners of the
Supreme Court in the Right to Food case. The views expressed here are personal.